Payday loans compared with borrowing against your car

There are a lot of ways to borrow money if you should find yourself in a tight financial spot. Consumers who have a short-term need for money can take out a bank or credit union loan, borrow from a charge card, or afford a quick cash loan to address their needs, but car title loans are growing in popularity among lenders.

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There are good ways to borrow cash and poor ways to borrow money. Clearly the ideal and cheapest way to borrow money is to take out a loan from a bank or credit union. Car title loans are similar to cash advance loans or quick cash loans in cost, but include additional risk. If you are destitute or have insufficient credit, you may be stuck with cash advance loans or car title loans. The most costly form of unsecured lending would be a payday loan, but interest rates can quickly run into the three hundred to one thousand percent range for a two week loan. If you are financially secure, you can almost certainly borrow from banks or charge card accounts. A credit card loan will do, but such borrowing carries a higher interest rate.

Auto title loans include risk -An auto title loan works similar to a cash advance, but the loan is secured by the title to the individual's vehicle. If the vehicle title loan is not repaid, the lender may take the car and in many states, they may sell it to recover their loan amount. In a couple of states, including Georgia, the title lender may even keep all of the money, no matter the amount. Auto title loans are likely to last somewhat longer than payday loans; a month is the most common time period.
 

Quick cash or cash advance loans are not backed up with collateral -Payday loans are paid for with a postdated check for the loan amount plus the charge. Cash advances are unsecured, which businesses say explains the high price. Quick cash advances are remarkably expensive; rates of interest for a $15/$100 fee run almost 400% per year. A quick cash advance is a short-term loan of two weeks' duration. For a quick cash loan, the consumer applies for a modest loan in the amount of one hundred to five hundred dollars and pays a fee that ranges from $15-30 per one hundred dollars borrowed. These financial instruments can be renewed; it may be renewed, or rolled over, for an extra 14 days if the consumer pays the fee once more.

Given that these transactions are secured, one could think that they would be more affordable. The individual not only has to pay steep interest payments, but he or she is also risking the loss of their automobile if they do not pay on time, and that takes place fairly often. Despite the fact that vehicle title loans present less risk to the business, they often have rates that average 300-400% annually.

Although both auto title financing and quick cash advances offer temporary cash to people who must have it at steep interest rates, vehicle title financing comes with extra risk to the borrower. It is one thing to borrow money at a high interest rate that contrasts favorably to getting a loan from the mob, but it is another thing again to chance losing your personal transportation if you cannot pay. Consumers who are pondering borrowing against their cars should be careful. Failure to pay close attention to the terms of the financing could cost you your vehicle.  How would you repay then?